A Seminal Panic about Defence IT: The Marconi Scam, 1913

100 years on, corruption at a UK telco contains lessons on Snowden, Huawei and globalisation.

A century ago next summer, the First World War began. Yet this summer, few know about the massive telecoms upset which, in Britain, preceded the guns of August 1914. That’s a pity; for to get behind today’s security panics about IT whistleblowers such as Edward Snowden and IT suppliers such as Huawei, it pays to go back to the venerable Marconi Company’s original plans for the British Empire’s first system of international wireless telegraphy.

Guglielmo Marconi was a Bolognese fluent in English. In 1895, using long, vertical antennae mounted on the ground, he achieved a world first: transmitting signals, without wires, over a good mile. Dismissed as mad by Italy’s PTT, he came to London and was adopted by the Post Office. He was 21.

Swiftly, Marconi established a high-powered organisation to commercialise his ideas. The Marconi Company only really matured, however, with the arrival, in 1908, of Godfrey Isaacs as managing director. As Frances Donaldson records in her exhaustive 1962 book The Marconi Scandal (Bloomsbury, 2011), in March 1910 Isaacs offered the Colonial Office a scheme to hook up Egypt, India, Malaya, China, Australia and Africa through 18 wireless stations. The intention was to give the Empire a military advantage through a unique telecommunications network.

Wireless was in the news. In 1910, when the wife-murderer Dr Crippen was apprehended on a trans-Atlantic ship bound for Canada, his was the first ever bust aided by wireless communications. Then, in April 1912, a month after the Marconi Company signed a tender with Herbert Asquith’s Liberal government, the sinking of the Titanic, accompanied by transmissions from wireless apparatus onboard the ship, spoke again of upset and the growing role of wireless. In politics, Liberal reform of the Lords (the Parliament Act), welfare (the Insurance Act) and Ireland (the Third Home Rule Bill) blended uneasily with Conservative reaction, and growing disgust with Germany. On the side of wireless, the Marconi Company had, by 1912, set up subsidiaries in the US, Canada, Argentina, Spain and Russia. To protect its patents, it sued rivals all over the world.

Soon, however, there were allegations of government favouritism toward Marconi over the tender for the network, as well as rumours that chancellor David Lloyd George, postmaster general Herbert Samuel and attorney general Sir Rufus Isaacs – the brother of Godfrey, Marconi’s MD – had made money from a ramp-up of Marconi shares. At the beginning of 1911, these had languished at 14 shillings. By April 1912, however, they stood at £9. 17s. 6d.

On 19 July, the Marconi Company’s contract was tabled for ratification in the House of Commons. The firm would build stations, priced £60,000 each, in England, Egypt, the East African Protectorate, South Africa, India and Singapore. It would also get 10% of the gross take of each station for… 28 years.

To the Conservative Opposition, these looked like rich pickings. Thus, the day after the Marconi contract was tabled, Outlook, a weekly journal, began to say as much. Soon enough, Eye-Witness, another weekly associated with the writers Hilaire Belloc and G.K. Chesterton, published another series of pieces attacking the Liberals on the issue.

Many of the criticisms made then, sound familiar today. Marconi was not state-owned, yet no competitive bidding surrounded the contract given it and although rivals may come up with a better system at any moment, Marconi might well be able to entrench its monopoly. After five years or six stations, it could blithely inspect rival installations, ostensibly to check that its patents were not infringed. While Marconi itself would only supply wireless apparatus at each station, it would make a mark-up on masts, buildings, engines, boilers and dynamos supplied by third parties. Given, too, that Marconi’s key patent needed renewal within three years, postmaster general Samuel would meet a conflict of interest: if he refused to grant renewal, his imperial network would be jeopardised.

Critics went further. In the decidedly un-PC language of his day, Outlook questioned whether Marconi’s shareholders were “the right sort of people to be entrusted with an all-British scheme of wireless telegraphy”. Nearly half, after all, were Irish nationalists; another quarter were foreigners, “and perhaps not always friendly foreigners”; and of the final quarter, Outlook added in a choice phrase, “comparatively few are Gentiles”. For its part, Belloc & Co sent men with sandwich-boards to accost Sir Rufus Isaacs outside the Commons, and Godfrey Isaacs outside Marconi’s offices in the Strand. The legend on the placards: “GODFREY ISAACS’ GHASTLY RECORD”.

Reacting, the Commons did something that’s very fashionable in contemporary Britain: it appointed a committee of inquiry to look into the Marconi contract. In farcical proceedings, the committee took no fewer than 13,000 questions, lasted nine months and, though confined to putting out a single report, elected to issue three conflicting ones. Typically enough, however, its main edict contained what Frances Donaldson calls “lyrical and complete” acquittals of all three ministers. That was probably fair on the charge of uncompetitive tendering: as Samuel had earlier pointed out, neither the Post Office nor the Admiralty had the resources or telecoms expertise to do a Marconi. Yet on the more substantive issue of ministerial insider-dealing in shares, the government took some hard knocks.

In June 1913 The Times published six outraged leaders on Marconi. The Liberals lost by-elections in Newmarket and Altrincham. Lloyd George went grey, thin and lined, and took up spectacles. In Gehazi, his poem against Sir Rufus Isaacs, Rudyard Kipling wrote five anti-semitic stanzas which some rate as among the most hateful (in both senses) in the English language. Yet, after all the fuss, Britain only got itself what was called an imperial wireless chain – by this time based on short-wave directional transmission and reception – in 1927. Marconi built it, but the government owned it. During the World War I, however, it was Cable and Wireless lines, not Marconi telegraphy, that carried British military communications.

There are three lessons from the Marconi affair. To maintain national security, the state, lacking competence itself, has for a long time relied on private, outsourced IT. That, as Edward Snowden has shown with his employers Booz Allen, is a formula open to damaging intrigues. But it is an unavoidable formula.

Second, in a globalised world economy, IT contractors to any nation-state are not going to be purely national in composition. Yet pillorying them for their origins, in the way that the US and British authorities do to Huawei, tends not to increase security, but to create a febrile atmosphere that brings closer the prospect of war.

Last, if you do want a better world and better IT, don’t allege corruption on the part of your opponents, or call for a public inquiry. That kind of politics is conservative, and 100 years old.

Instead, debate the kinds of betterment you want. Play the ball, not the man.